New media rights for televisual
content
102. We have already outlined the importance of compelling
content in driving the development of new media platforms. As
new forms of broadcasting materialise, and new operators enter
the field, competition for secondary rights to attractive content
has intensified. [252]
Producers of that content, therefore, have sought to maximise
their ability to exploit and extract revenue from those secondary
rights. Over the years a three-way tug-of-war has developed between
producers, commissioners (generally the public service channels)
and non-traditional media operators, all seeking a measure of
control.
103. The market for new media rights—secondary
rights—is currently small, although it is generally recognised
that it will expand.[253]
Ofcom listed possible new media rights categories:
- Simulcast distribution of the
programme on digital channels across different platforms (e.g.
Internet, mobile, as well as traditional broadcast platforms)
- Time-shifted distribution—on traditional
broadcast platforms and alternative distribution platforms
- On-demand services—via free to view, pay
per view or subscription
- Re-purposing and re-versioning of content.[254]
The Codes of Practice and associated terms of
trade
104. Section 285 of the Communications Act 2003 established
a duty upon each licensed public service channel to draw up and
revise from time to time a Code of Practice setting out the principles
to be applied by that channel when agreeing terms for the commissioning
of independent productions. Each channel's Code of Practice must
secure, amongst other things:
- sufficient clarity at the time
of commissioning about the categories of rights covered;
- sufficient transparency about amounts to be paid
in respect of each category of rights; and
- satisfactory arrangements for the duration and
exclusivity of those rights.
At the time that the Communications Act was debated,
these provisions were perceived as offering new levels of protection
for the interests of independent producers. One witness described
the impact of the changes in television production rights—and
the increased scope for producers to exploit their content both
in the UK and internationally—as being very important in
attracting new investment into the sector.[255]
105. The new Codes of Practice were introduced by
broadcasters at the beginning of 2004. The BBC told us that its
Code had been "instrumental" in clarifying the ownership
of primary and secondary rights and that the challenge was to
keep the framework "relevant in a changing world", always
ensuring that the right of independent producers commercially
to exploit their intellectual property did not impinge on the
BBC's ability to serve the licence fee payer.[256]
106. Despite the general acceptance of the value
of establishing Codes of Practice, the terms of trade drawn up
under those Codes, governing new commissions and the distribution
of rights to broadcast programming, never commanded full support
from interested parties. Channel 4 argued that the terms had had
a disproportionately negative effect upon it, as other public
service broadcaster competitors (BBC and ITV) had substantial
in-house production capacity which was not covered by the agreement.
Channel 4 took the view, in its response to Ofcom's recent consultation
on the television production sector, that a portion of its audiences
would use new media platforms and on-demand facilities as alternatives
to viewing linear broadcasts, with a direct impact on viewing
figures on traditional platforms (and therefore advertising revenue).
Channel 4 therefore sought to revise the terms in a way which
would allow it to have access to a wide range of new media rights
as part of the primary rights package.[257]
107. The Satellite and Cable Broadcasters' Group
(SCBG) stressed that its members relied upon being able to acquire
secondary rights in order to build audiences and thereby generate
revenue to finance the commissioning of new material.[258]
The Group pointed out that the negotiations which were then taking
place between PACT (representing independent production companies)
and the terrestrial broadcasters on updating terms of trade had
been bilateral only and that, if anything, acquisition of secondary
rights was becoming harder rather than easier for Group members.[259]
The SCBG accused Ofcom of failing to ensure that PACT and the
terrestrial broadcasters took account, in their negotiations,
of the need to ensure a strong competitive market in secondary
rights.[260]
108. The SCBG also claimed that terrestrial broadcasters
took advantage of their public service status and privileges,
which enabled them to finance the majority of UK programme commissioning
and then take a restrictive attitude in releasing secondary rights
to their programming.[261]
It cited a number of occasions when an independent channel had
sought to acquire secondary rights to material which it had commissioned
jointly with a terrestrial broadcaster but had met a determined
attempt by the terrestrial partner to acquire for itself exclusive
rights (or the inclusion of secondary rights as part of an all
rights bundle) by exerting pressure upon the producer, sometimes
giving the impression that the producer stood to lose out in future
unless it agreed to the terms proposed by the terrestrial broadcaster.[262]
We note, in passing, that the UK Film Council identified a similar
problem in relation to film and warned that "rights creep"
of this sort "would be to the severe detriment of both consumers
and citizens".[263]
109. The SCBG was not alone in directing criticism
at traditional broadcasters for taking a restrictive attitude.
BT called upon the BBC to use its position as a provider of publicly-funded
programming to stimulate the growth of new media "by allowing
reasonable and fair access to its programming".[264]
Hutchison 3G described the process of securing TV content for
mobile networks as "very frustrating",[265]
singling out the BBC's attitude towards providing content as having
thus far been "mixed at best and contradictory at worst".[266]
The Mobile Broadband Group told us that simulcasting[267]
of TV channels to mobile phones had to be interrupted when rights
clearance for a programme could not be obtained. It called for
a rights framework which delivered a "clear, consistent and
timely rights regime for all platforms" and minimum holdback
periods.[268] BT, although
declaring itself as reasonably content with progress in reaching
agreement with content providers in acquiring rights for content
for its BT Vision service,[269]
made a similar appeal.[270]
SCBG urged Ofcom to intervene to ensure that terrestrial broadcasters'
purchase of primary rights for their terrestrial channels did
not confer automatic rights to broadcast on their digital channels,
and it advocated an entirely separate negotiating process for
the purchase of secondary rights, open to competition under the
control of the independent producer.[271]
110. PACT agreed that broadcasters sought to exercise
their bargaining power, gained through their dominance of the
market for commissioning new material,[272]
by "bundling" rights for broadcast on non-traditional
platforms in with primary rights for no additional cost. PACT
said that this "clearly represents a transfer of value back
to the terrestrial broadcaster, negating the impact of the Codes
of Practice laid out in the Communications Act 2003 and potentially
undermining the business model of PACT members".[273]
Ofcom has confirmed its view that the main terrestrial broadcasters
are likely to remain the main buyers of programming and will therefore
retain much of their negotiating strength.[274]
111. PACT had specific concerns about practices by
broadcasters which it perceived as damaging to producers' interests.
Two practices came in for particular criticism: the use in commissions
of "holdback" periods, in which a broadcaster has the
right to prevent a producer exploiting secondary rights within
a fixed period of time; and "warehousing", a term for
the practice of acquiring rights but not subsequently exploiting
them. It argued that the holdback provisions, which broadcasters
negotiated with producers allowing them to restrict onward sales
of programming ran counter to the intention of the Codes of Practice.[275]
The Satellite and Cable Broadcasters' Group agreed, believing
that holdback periods, by denying public access, created a window
for piracy;[276] and
it argued that holdback in general should be "significantly
reduced or eliminated".[277]
Video Networks Ltd., who, at the time that evidence was received
for this inquiry, were suppliers of the Homechoice service offering
TV and radio channels via broadband, noted the "chilling"
effect of holdback periods.[278]
With regard to "warehousing", PACT claimed that incumbent
broadcasters had a long history of such practices, which it viewed
as being designed to deny new entrants access to content and thereby
to stifle secondary markets.[279]
It maintained that the practice was damaging to the public interest,
to producers' commercial interests and indeed to broadcasters'
interests.[280]
112. The BBC defended itself against these attacks
and maintained that there were "numerous examples" of
its efforts to make its content available on-demand, for example
on a cable platform or through Homechoice (now Tiscali TV). It
also cited an agreement with Orange to make clips from BBC comedy
productions available on mobile phones.[281]
New terms of trade
113. During the course of the inquiry, the main public
service broadcasters agreed individually with PACT new structures
for rights governing use of content supplied by independent producers.
The new terms were outlined in evidence to us by Mr Highfield,
Director of New Media and Technology at the BBC;[282]
but they have since evolved. Under the current provisions, there
will be an initial window in which the BBC will have an exclusive
licence of up to five years in the UK television market (with
an option to renew for a further two years), depending on genre
and channel of initial broadcast. Viewers will be able to:
- preview programmes up to seven
days prior to first linear broadcast;
- "catch up" on viewing or listening
by downloading content within seven days of transmission and then
opening the downloaded file within thirty days; and
- "stack" series programming up until
seven days after linear transmission of the final episode, subject
to a maximum thirty day period of programming being available
on demand at any one time.
The second window would open once the first had closed:
at this point BBC content would become available for commercial
exploitation. The standard policy for release of a returning series
for commercial exploitation will be for a first series to be released
once two further "runs" of the series have been transmitted.[283]
114. The agreement concluded between PACT and Channel
4 differed significantly from that made with the BBC. Channel
4 licences will in future last for three years rather than five;
and Channel 4 will be able to offer content on demand for up to
30 days after transmission. Channel 4 will have the flexibility
to decide what charges, if any, it will make for such downloads
and how the business model will work. Once the 30 days have elapsed,
the programme rights will revert to the producer unless Channel
4 seeks to extend its exclusive licence, in which case the producer
will either accept the price offered or will keep the rights with
a holdback condition that they cannot be sold to another broadcaster
for a further five months.[284]
Channel 4 expects to achieve commercial deals in the vast majority
of cases.[285] The
"warehousing" issue was resolved by undertaking to include
a "use or lose" clause in commissioning contracts, so
that new media rights not exploited within a specified timeframe
would automatically be released from broadcaster to producer.[286]
115. Channel 4 told us that it was "comfortable"
with the deal that had been struck and that it genuinely represented
a "win-win" situation for both sides.[287]
In further discussion, however, it acknowledged that the agreement
was "not ideal" and that adjustments might be needed
in future to some of the detail, including splitting of revenue.[288]
More recently, the Chief Executive of "Five" has told
us that she was "very relieved" that the new terms of
trade had been described as short-term solutions. She believed
strongly that advertising revenue from on-demand services could
replace rather than supplement revenue from more traditional funding
formulas (i.e. advertising on terrestrial services), and that
for producers to take a share of the revenue from advertising-funded
on-demand services (as is envisaged under the new terms) could
lead to a net decrease in income for the broadcaster.[289]
116. PACT clearly believed that it had made a significant
advance in the new deals. It was confident that what had been
achieved was "very, very good news for satellite and cable
broadcasters" and would make products available in the market
sooner,[290] and it
welcomed in particular the acceptance that a commissioning agreement
for broadcast on a primary channel could not "bundle"
up rights for secondary channels.[291]
We note, however, that rights for transmission of content to mobiles
at the same time as linear broadcast on television will rest with
the broadcasters.[292]
117. The new terms of trade between producers
and broadcasters have swung the balance towards producers. Steps
to strengthen the ability of content originators to retain greater
control over their rights are welcome; but commissioning channels
need to be able to derive fair value for the product which they
have financed, particularly as the climate for advertising on
terrestrial television becomes harsher. While we welcome the fact
that agreement has eventually been reached between producers and
broadcasters, we expect that a further review of the terms of
trade will become necessary once the value of on-demand services
to broadcasters' funding models becomes clearer—probably
sooner rather than later.
118. Some of the restrictive practices described
to us in evidence as being used by broadcasters when commissioning
programming and driving deals on rights for future transmission
were, if accurately reported, counter to the spirit of the Communications
Act. We believe that they are less likely to occur under the new
terms of trade, although Ofcom must remain vigilant.
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